29 November 2013 | Reading time: 2 minutes
Rolling the dice.
Competitions are an increasingly powerful way for a business to promote its products and services, or otherwise to interact with users via its social media pages. They can be highly effective marketing tools. However, there are some important guiding principles to be aware of in navigating the State-based laws which regulate competitions in Australia.
Skill or chance?
One of the most important distinctions in devising a competition is deciphering between a game of skill and a game of chance. A competition that involves elements of chance in determining the winner(s) (otherwise known as a lottery) will be considered to be based on chance. If winner(s) are determined on the basis of the skill, creativity or originality in their submission the competition will be considered to be skill-based.
The distinction between skill and chance is important in determining if permits are required (and permit fees payable) under the regulatory regime for competitions. National chance-based competitions require competition permits in at least two Sates. Chance-based competitions must also comply with regulatory requirements, including ensuring that:
Purchase to enter.
There is no restriction on requiring an entrant to purchase a product or service to enter either a skill or chance-based competition in Australia, so long as the purchase price is the recommended retail price. Chance competitions must still be “free to enter” after the purchase has been made. However, standard postage costs or premium text messaging charges of up to 55 cents may be incurred by an entrant.
Privacy and consumer protections.
There are a range of privacy and consumer protections that must be considered when setting up and running a competition. Companies must ensure that they comply with such regulatory regimes. For example, pursuant to the Privacy Act 1988 (Cth), entrants are entitled to understand how, why and for what purpose their personal information is collected. Further protections under the Australian Consumer Law mean that entrants, as consumers of the competition, have the benefit of certain statutory guarantees that cannot be excluded at law.
There may be significant penalties for a company that fails to comply with this regulatory regime, or fails to obtain competition permits under the relevant State laws. A breach of the Australian Consumer Law may result in penalties of more than $1 million for each breach. As for collecting personal information as part of the competition, the new privacy laws is about to hit our shores in January 2014 to add another hefty penalty regime.
Roll the dice.
If you are running competitions of any kind, it is crucial to determine whether it is a game of skill or a game of chance. Carefully drafted terms and conditions will help ensure that the dice rolls the right way for your competition.